Things you need to know.
– Markets calm down after the shot across the bow.
– It’s FED Day…. Don’t expect any surprises.
– Tech Earnings kick off…META, TSLA & MSFT after the bell.
– BABA introduces their latest AI model.
– Try the Giambotta
“What a difference a day makes, 24 little hours, Brought the Sun and the Flowers, where there used to be rain…My yesterday was blue dear….” The fabulous Dinah Washington – February 1959.
Oh boy – on Monday – it poured….…. but Tuesday brought the Sun and the Flowers and what a day it was…. you almost don’t remember the (rain) chaos created on Monday after the Chinese released a ‘story’ on Sunday evening about how a one yr old startup – created a ‘better AI mousetrap’ using sub-par, lower quality NVDA chips that use LESS energy challenging the very work that Anthropic, Open AI, Microsoft, Perplexity etc…. have been doing for years….
This news raised concerns about tech valuations and that sent those names reeling….
The announcement causing the tech sector to hemorrhage on Monday with losses totaling more than $600 billion….I just want to know how much SOXS (Direxion Semiconductor triple levered short) the CCP bought on Friday – ahead of that announcement on Sunday eve – because that ‘leveraged ETF’ surged by 20% on Monday! Think about that for just one minute.
Ok – enough of that…It was a good day, not a glorious day, but it was a good day… The Dow advanced 136 pts or 0.3%, the S&P up 55 pts or 0.9%, the Nasdaq gained back 2% or 390 (of the $671 pts it lost) while the Transports gave up 154 pts or 0.9% and the Equal Weight S&P added 2 pts. The Bloomberg Mag 7 Index surged by 732 pts or 2.7%.
Of the 11 S&P sectors – only 3 gained – Tech + 2.7%, Consumer Discretionary + 0.1% and Communications + 0.5%…the other 8 sectors ended the day lower – once again detailing how strongly the tech sector influences the indexes. The VIX fell by 8.3%, taking it back to trendline support at 16.41. A move below that level – will help calm the markets and open the door to further advances. Should we get mixed or bad news from the megatech guys – then I suspect we will see the VIX spike higher putting pressure on stocks.
All this happened while traders, investors and the algo’s prepare for the Fed’s rate decision which is due at 2 pm today and ahead of the start of the megacap earnings season. MSFT, TSLA & META due after the bell today, AAPL tomorrow, GOOG and AMZN in early February with NVDA the last one to report on February 26th. While there are ‘other’ tech names – let’s be honest……the market is waiting for the MAG 7 to report and they are priced (once again) to perfection, so any whiff of caution or concern will send those names lower…. Period the end.
So, by now you know the FED is expected to do NOTHING, no rate cut, no hint of a March rate cut, or a May rate cut – because there is no reason to suggest that we need one…because as far as the data suggests – the economy is just fine and current 4.25%-4.5% are well within the historical 4% – 6% band.
But as you expect, the algo’s will be on the edge of their seats during the presser that begins at 2:30 pm…. Just waiting to hear something that suggests a rate cut is coming, (because that is what they want)….Now currently the market is pricing in a July cut and possibly a fall cut….Not something I support at all…unless of course, the data suddenly turns sour….right now – it is sweet….nothing suggests panic so then the logic should suggest holding rates steady. In fact, I am in the camp that the risk is to the UPSIDE this year… even as Donny demands lower rates….and tells the media that he is sure JJ will ‘hear him’. Let’s see what JJ has to say today. Roger Ferguson – former Vice Chair of the FED telling us that he thinks JJ will reiterate the FED’s independence and not be swayed by demands from the WH.
Eco data today in addition to the FOMC announcement includes Mortgage Apps, Wholesale Inventories & Retail Inventories. None of which will be a mkt mover in my opinion – unless they are so different from the expectations.
We will get another 20 or so before the opening including…. DHR, PGR, NSC, OTIS, GD, ADP, GLW, HES, VFC, TMUS & NDAQ. These companies represent Life Sciences, Insurance, Rail Freight, Commercial & Res Bldg & Systems, Defense, Professional Services, Exploration & Production, Wireless Communications, Security & Commodity Exchanges. By now – we have more than 20% of the S&P companies report and we are running at an 80% beat rate….
Bonds did nothing really – rates remain unchanged. The 2 yr is yielding 4.19% and the 10 yr is at 4.53%.
Oil – traded higher – rising 90 cts or 1.2% to end the day at $73.98 – this after the clowns tried to sell us on the idea that China’s manufacturing activity surprised to the downside and so China’s demand must be waning….And then after oil closed for the day – the API reported that US crude stockpiles rose last week….So I suspect that we will see pressure on oil today and in fact at 6 am – oil is down 70 cts trading at $73.10.
Now if you look at the chart – you will see that oil is down 8% off the January high – on Monday it traded down to trendline support at $72.17 and found ‘support’. Let’s see what happens next.
Gold continues to hug the $2800 level – this morning it is down $1 at $2793…as investors await the FED decision and the FED guidance. Gold will also be impacted by what happens with the 25% tariffs that are about to be slapped on all imported goods coming from Mexico and Canada effective February 1, 2025. Will those tariffs create instability causing investors to run for the ‘safety trade’? For now, Gold remains in the $2706/$2825 trading range.
This morning – futures are essentially flat…. Dow futures down 35 pts, the S&P’s up 3, Nasdaq up 80 while the Russell is up 2. The day will be all about the FED and then the anticipation of earnings from META, TSLA & MSFT after the bell. How will these guys incorporate the latest DeepSeek drama into their comments?
European markets are all higher today as well…. ASML (the largest European semiconductor manufacturer) reported strong 4th qtr. results – booking twice as many orders as analysts had expected…while shrugging off any DeepSeek concerns – saying that ASML is ‘very bullish’ on the AI boom and that they see ‘low cost AI models (like DeepSeek) driving MORE demand not less. That stock is up 12% in European trading….
The S&P closed at 6067 up to 55 pts. While the week got off to a rough start – many investors are now becoming a bit more circumspect around the AI news that sent markets into a tailspin as investors considered what it means for the sector. Overnight – Alibaba unveils their newest AI model (QWEN), and they suggest that it blows DeepSeek out of the water while achieving ‘competitive performance’ against top tier models – think OpenAI’s ChatGPT, Meta’s Llama 3.1 etc. So, this story is far from over…. Remember – competition is good. Like everything – the sector will evolve as the technology becomes more advanced.
I am still in the camp that the market needs to consolidate (pullback), so I remain patient – making sure not to chase names that I think remain expensive (tech). Which doesn’t mean I am not putting money to work, I am, in sectors where I see value – think Healthcare, Financials, Consumer Staples and the value trade – SPYV.
The recent action emphasizes the need for a plan. Diversification is key as you get older…. (Younger investors can take more risks). Today’s earnings reports will set the tone for tech…sit back and let it happen – I think the stocks are priced to perfection, so it would not surprise me if we see them decline (not crash) on the news….The selling coming from the trading community, not the investing community….Long term investors should take advantage of any weakness in those high quality names if they come under pressure.
Any questions? Give me a call. Click here https://slatestone.com/contact-us/ to contact me – Put KP in the message box and I will reach out to you to discuss your investment portfolio and any questions you may have.
Take good care.
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Giambotta
This is a hearty Italian stew, is the perfect way to “clean out the fridge.” It’s flexible and can be customized with your favorite vegetables or proteins. Here is what you need:
Ingredients (Serves 4–6) You need: olive oil, 4 garlic cloves, crushed, 1 large onion, chopped, 1 medium eggplant, diced, 2 medium potatoes, diced, 2 zucchinis, sliced, 2 bell peppers (any color), chopped, 1 can (28 oz) crushed tomatoes, 1 cup vegetable broth, 1 small can (6 oz) tomato paste (optional for a thicker stew), s&p,1 teaspoon dried oregano, 1 handful fresh basil leaves, torn
Prepare the Base: Heat a heavy-bottomed pot or Dutch oven over medium heat. Add the olive oil and garlic, sauté until about 1–2 minutes. Add the onions and cook until softened, for about 5 minutes.
Add Vegetables: Toss in the diced potatoes, eggplant, zucchini, and bell peppers. Season with s&p and oregano. Stir to coat the vegetables.
Next: Add the crushed tomatoes and vegetable broth. If you prefer a thicker consistency, stir in the tomato paste. Bring the mixture to a boil, then reduce the heat to a simmer. Cover and cook for 20 minutes, stirring occasionally.
Finish the Dish: Stir in the fresh basil leaves and adjust seasoning if needed. Let the flavors come together for another 5 minutes.
Serve Giambotta as a side dish, or you can make a main meal by putting it over rigatoni. You can make garlic bread for the ultimate comfort food experience.
Buon Appetito
